Apiary Fund Blog

Risk vs Reward in Trading

[fa icon="calendar"] May 4, 2019 6:00:00 AM / by Lukas MacMacKen

Trading has the appeal it has due to the reward it offers. Trading also has the dissuasion it does because of the risk it offers. With anything that offers significant reward, significant risk is going to be there. If there was a great return method with no risk factors, everyone would be well off and there wouldn’t be poverty levels. The risk you take as a trader and the reward you can receive is the same reason people go to casinos and play blackjack along with going to a race track and putting money on dog or horse races. The rush of dopamine when a good trade closes and seeing the balance in your account is great. The rush of cortisol when a bad trade is closing and you have a balance decrease gets the body going.

Regardless of your poison, trading has risks and rewards to consider. The largest of the risks is losing your money, especially with FOREX and leveraged accounts like those that Trader on the Street and Apiary Fund teach and trade with. A leveraged trading account can be especially risky if you don't have a margin call on your account. What this margin call will do is reduce the risk in the account if you don't have adequate stop losses. Once you begin to lose money that isn’t yours in the market, the margin call kicks in and closes all the trades so you don’t owe more than you put into the account.

Another risk is overtrading. The double-edged sword of overtrading is that it happens with both success and failure. A lot of the times, if a trader is having a good day and the goal return is made relatively early or easily, the trader will frequently continue trading to try and maintain that streak and that commonly results in the winnings being handed right back to the markets. On the opposite side, when traders are having a rather poor trading day, a constant attempt to recover the losses and go into profit, which usually results in further loss. To prevent this, Trader on the Street uses a platform that cuts off trading at a certain loss percentage to try and aid the trader against this overtrading.

Now, the benefits that trading offers are numerous. Since FOREX is a 24 hour a day market, it offers great flexibility in when you can trade. If you're just trying to make passive income, you can trade before or after work; if you're trading for your primary income, you can trade at most points of the day with multiple markets being open at different points. You can decide from multiple markets and volatility. On top of being able to trade whenever, there's the possibility to greatly increase your profits. You can trade four plus times a day making a substantial amount each time.

As with any high reward situation, there's a high risk. The goal, and what Trader on the Street attempts to teach is getting the risk to reward balance to tip in the direction that will be most beneficial to you, the trader. Learning where to place your eggs so you can count them once they hatch is what every trader progresses to. Understanding the progress and growth that takes place is critical to trading and making profits.

Topics: Risk Management, trader on the street, beginner trader, trading goals

Lukas MacMacKen

Written by Lukas MacMacKen

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